by BETTER FARMING STAFF
Ontario and Quebec’s Canadian Young Farmers Forum representative says a new Farm Credit Canada loan program with a $500,000 ceiling is a “great initiative” that recognizes “young farmers are vital to the success of agriculture in the future.”
Jessica Burgess, 23, from Bruce County, says she’d like to eventually take over the family dairy operation but with the costs of quota and land prices “I don’t know if it’s going to be viable for myself to do that as an individual.” The young farmer loan would help; although she hasn’t seen what the requirements are yet so doesn’t know if she would qualify.
But she’s pleased to see a loan in place with such a high ceiling. “They do realize agriculture is getting more expensive to invest in.” A federal news release issued Thursday, says the $500 million loan program offers people 18 to 39 who qualify, loans of up to $500,000 to buy or improve farmland and buildings. Interest rates are variable at prime plus 0.5 per cent and there are special fixed rates. As well, there are no loan processing fees.
Clem Samson, FCC’s vice president of western operations, says the loan program is available now. He says it is designed to encourage younger people to move into agriculture.
Young farmers, typically defined as less than 40 years of age, are involved in the formative years of an operation, Samson says. “As people build equity and so on it can be more difficult to get financing moving forward,” he says. “So what we thought we’d do is come about with a product that was less expensive fee-wise and so on and then also a rate that was lower than the normal industry would give out.”
The news release says about 16 per cent of Canadian producers fall into the younger farmer category according to the 2006 Census. BF
Comments
an online visitor replied on Permalink
Frustrated
I would like to become one of these 'young farmers'. I have found what I think is the perfect farm for my family and I have been working on a farm for over a year trying to learn more. I had gone to FCC before about a loan and was told I needed $400,000 down. Will we need a down payment for this loan also? Even if I sold my current house, I wouldn't get that much and the only other option is to sell as much of our stuff as possible to get cash-which happens to be farm equipment we've been collecting. Even if I qualified for the loan and didn't need a down payment, it's not even half of what the asking price of the farm is. I'm not asking for a handout here, just a chance. The plan is for my husband to stay at work and I would stay on the farm to reduce the risk of not making the payments. They don"t seem to look at the whole picture.
an online visitor replied on Permalink
Real Estate Prices & FCC Loans
The Canadian residential real estate crash has already started. See Garth Turner's Blog greaterfool.ca
Some think prices will slowly drop 20% to 30%, bottoming of market occurring in Year 2038; others think it will be much worse.
It is unclear what will happen to farmland prices. Since real estate development will collapse for quite a while (over-built for last 20 years, unaffordable), turning the Back 40 into a sub-division with huge profits for the developer and the farmer will be rare.
FCC has helped to create a huge farm debt load, using bubble-based farm pricing, the mirage of Supply Management quota values, temporary windfall profits in commodity grains and other cash crops, and interest-only loans. Farmers can only carry this huge debt today because interest rates are lower now than ever before. The farm crash and bankruptcies of the 70's and 80's may soon repeat.
Once interest rates rise to a more normal level, many farmers will be in big trouble, as will be FCC too. This pending debt crisis won't be solved by spreading the debt amortization out a few more years as FCC likes to do so their loan portfolio looks good. Currently, it will take the average farmer more than 70 years to pay off their current debt. What's the chance of something going wrong sometime in that 70 year period? For more info and graphs, see Small Flock Poultry Farmers Blog postings:
* Frightening Farm Finances
* FCC: The Farm Debt Trafficker
Glenn Black
Small Flock Poultry Farmers of Canada
an online visitor replied on Permalink
Enough with the gloom and doom.
Pleaseee,Garth Turner the Don Cherry of the financial Management world,less than a year of Revenue minister and suddenly the know-it-all about world finance,a newpaperman with celebrity status.l don't even think Don Cherry would have the gaul to suggest where the state of hockey will be in 25 years.
What small town or large city do you see houses sitting empty because of "over-built" ? certainly none that l have drove through lately! Canada's population is set to increase by 5 million people come that magic 2038, excatly where will they live ?Real estate will never collapse in this country, if it was going to it would have during the US hard times.
As far as farmland devaluing, if it does to some extent then it will be gobbled up by foregin investers and we have saw some of that already even with high land prices, so its not something that we want to see happen.
The one fact that these Gloom and Doomers never want to even look at is that the world population will be 1.8 Billion people more by that 2038 figure and yet they continue to say farmers will be in big trouble come the future..rubbish!..as long as the population grows so too will the need for food, l will never understand how some so-called financial experts continue to ignore that.
an online visitor replied on Permalink
Deja vu all over again
I had to double-check to see if you posting wasn't dated December 9, 1979 because all of your sentiments completely-accurately reflect what people were thinking, and saying, at that time.
A 50:1 price/earnings multiple for farmland is unsustainable, period - it won't last, and can't last. Farmers are the worst people for ignoring one of the oldest, and truest investment adages - "things look the rosiest just before the crash".
Stephen Thompson, Clinton, ON
an online visitor replied on Permalink
Inflation and demographics won't work this time around
The traditional way for governments and the chronically-overextended to ease their payments, is through the miracle of inflation. However, inflation seems to be, if not dead, at least dormant.
In addition, our housing "bubble" isn't going to be helped at all because baby-boomers are going to be trying to downsize their houses at the same time Generation Y can't afford to buy, because the jobs they need to be able to afford houses, are still being jealously-held by baby-boomers.
A somewhat different view is held by Kevin O'Leary who now believes housing won't so much crash, but stay constant for the next 20 years, meaning that what you pay to buy a house now, is what you're going to get for it 20 years from now.
The problem in agriculture is that too many people firmly believe prices can only go one way, and that's up - it's worked for quota, at least for now, and nobody deludes themselves better than, and/or more completely than, farmers.
Actually, nothing would be better for the economy than to have a 50% real estate crash and a 100% quota crash - it would get rid of a lot of bad, albeit extremely lucky, farmers and would allow the next generation of farmers and home owners a fighting chance.
Stephen Thompson, Clinton ON
an online visitor replied on Permalink
Keep your "powder" dry
I have a number of tax clients in the exact situation you face, and my advice to them is "wait". Most of them are building their equity by way of owning a good house in town, and see no reason to move to a shabby house on any farm they might be able to afford.
There will again come a time, like it did in the early 70s, and in the mid 80s, when the price/earnings multiple of farm land declines to where it is affordable once again. As a purely practical matter, at both those times, people could trade their house in town for an identical house in the country, with a 100-acre farm thrown in for free - it will happen again.
The only "fly in the ointment" is the strong potential for a crash in the Canadian housing market - however, if, and/or when, that happens, the price of farm land will decline even further, and so it should.
This FCC program is no different than the various new-entrant programs offered by various supply managed commodities - window dressing to make themselves feel good, but doing nothing of substance to help prospective farmers.
Stephen Thompson, Clinton ON
an online visitor replied on Permalink
a no-show.
As difficult as it may seem for a young couple, buying a farm is not like buying your first small house.The bankers want to see a financially sustainable long-term plan before handing out big bucks, unfortunatly stability in most Agricultural sectors these days is a no-show.
an online visitor replied on Permalink
Why does it cut off at 39 It
Why does it cut off at 39 It should be for people of all workable age that want to start a new farm
an online visitor replied on Permalink
39
After 39 I guess they consider you to be old and therefore doesn,t deserve to start farming or be farming period. Thats the problem the talk about putting people in diffferent catagories is wrong but they not long pounding down the older farmers not old like they like to state so is it alright for the goverment to label us. I,m consider myself young at 54 and would love to try something different in the farming community and I think some of the readers or writers think I should be put out to pasture for a 20 year old can take my place free. I could put down I,m 39 again?
an online visitor replied on Permalink
Not enough?
After reading through your comments, I had some thoughts that I thought I would share.
If you were to get one of these loans, wouldn't be enough to get started on a small scale. I mean no young farmer is going out to buy top of the line equipment, and get a farm on $500,000.
Also, to get many of these types of loans you need to have a business plan. They don't give it to you willy nilly.
an online visitor replied on Permalink
From here.
I wonder how forgiving FCC management would be to these young farmers, should circumstances such as interst rates render them unable to pay their loans. I certainly wouldn t count on their, young loan agents, to help them out. If bailouts were necessary should the taxpayer foot the bill,,again. FCC was largely responsible for the run up in quota prices,along with the Europeans and their endless sources of wealth.
an online visitor replied on Permalink
It might sound cruel but no
It might sound cruel but no bail outs for farmers spending $12000 plus per acre for land should be had. Fcc management then should be fired , we have had some greedy 80s farmers who are now age 65 and want to cash in screwing the young puppy head young farmers. Farmers feed cities while hooking one another with debt. Debt review board cases could be brutal if economic 101 is used.
an online visitor replied on Permalink
Quota
Didn,t the milk board blame it on the teachers union for high quota prices?
The farmers all know it was the rich Euopeans driving the price up and the board didn,t want to let on the real truth, they seems to have a keep quiet mode now.
an online visitor replied on Permalink
$500,000 is good for about 4
$500,000 is good for about 4 quarters of land. Not enough to to do much but enough to get you into trouble. However: If I was getting out this should increase the land prices another 20-30 % as they younger producers can increase the bidding prices.
an online visitor replied on Permalink
loans
What happens when the interest rates go up to 10 or 20 % what will they do to help the ones they loaned the money too. Will they give the money to someone to buy into the parents farm so they can have money to put up a new building?
The ones that gets the money most times are the ones that doesn,t need it.
I think if someone that doesn,t have any parents in farming at any age should be offered the money to start a farm. There is lots of people out there that would love to start farming with a bit of a hand up and not a hand out.
an online visitor replied on Permalink
Every Ontario generation
Every Ontario generation produces foolish and greedy farmers, this time the world and country Canada Ontario with 16 billion debt cant help, nor should they. We keep electing knowit all mpps while the civil servants manage so they get cash for life pensions.. Guess how many MPs and MPPs we have on taxpayers pension pay and did we get results for the value we spent on these government people.
an online visitor replied on Permalink
I pitty ayoung person having
I pitty ayoung person having to buy a combine of $300000 plus, pitty the wives of these farmers. it also shows how out of touch some of our farm organizations are.
an online visitor replied on Permalink
The only issues with offering
The only issues with offering money to anyone to start farming at any age (regardless of having an agricultural background or not), are:
1) Younger people have not had as much time to build up capital to purchase property/buildings/etc.
2) More people would see this as a tax write off, which would make people want to become "hobby" farmers. This in turn would not help the viable sustainability and future of agriculture in Ontario or Canada, and would also cause land prices to be driven higher yet.
Lastly, this article is celebrating the fact that young people can get into farming and help keep agriculture alive in Canada. It does not state that the funds can/would be used for purchasing quota or livestock. It states land and buildings.
an online visitor replied on Permalink
In the 80s farmers got in
In the 80s farmers got in trouble because of the stupid things they didin the70s
the farmers asked for debt review in the 80s to bail them out, we never learn.
an online visitor replied on Permalink
more to the point
Would you be in favour of bailing out dairy and poultry farmers if/when quota crashes, especially when they were the ones who were betting it wouldn't? Stephen Thompson, Clinton ON
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